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Loan Modification Information
Loan Modification Options
The most desired and popular loan modification to get is a principal reduction, which reduces the amount owed on your current mortgage significantly enough to allow you to stay in your home. However an interest rate reduction, which either lowers the monthly interest and/or changes your adjustable rate mortgage into a fixed rate mortgage is a loan modification that many lenders like to do because it helps to prevent the homeowner from going to foreclosure or short sale. The last thing lenders want to do is go to foreclosure or short sale because they end up losing a lot of money.
Avoid Foreclosure
More and more the lenders want to modify loans instead of going to foreclosure. Banks are just not in the real estate business. They are in the business of lending. That’s how banks make their money, however they can’t lend money when they have too many non-performing notes (unpaid mortgages). The more NPN’s they have, the less they can loan because investors know that they notes they plan on buying probably aren’t worth the paper they are written on. What does all this mean and have to do with loan modifications? Very simple:
THE BANKS WANT TO WORK WITH HOMEOWNERS TO MODIFY THEIR HOME LOAN SO THEY CONTINUE MAKING PAYMENTS!
This will allow the banks to show performance on their portfolio and in turn, will make their portfolio worth a lot more. Therefore, they will continue to lend and continue earning money. This is good for you because you will be able to keep your house and continue gaining credit worthiness.
The lender is going to be securing positive results for loan modifications even more if you have an adjustable rate mortgage (ARM). These are the preferred loans to qualify for a mortgage. The adjustable rate in addition to being behind on your payments will be easier for the bank to approve a loan modification because they are able to make some adjustments that would be easily determined with a verifiable hardship.
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